A study undertaken by Export-Import Bank of India (Exim Bank) has stated that India is one of the fastest growing jewellery markets in the world; the growth in this industry is likely to be driven by growth in jewellery exports to the major markets, like USA and Europe, and growing demand for jewellery in the domestic market. The study entitled, ‘Indian Gems and Jewellery: A Sector Study’ was released by Hon’ble Minister of State for Finance, Government of India, Shri Namo Narain Meena, at the inaugural function of the Tenth Commonwealth – India Small Business Competitiveness Development Programme, in Jaipur, on February 21, 2010.
The study draws attention to the fact that India is the largest consumer of gold in the world, and is also one of the largest diamond processors in the world, with more than 90% of diamonds in the world in terms of pieces, around 80% in terms of carats, and around 55% in terms of volume, being processed in India. India is also the largest consumer of gold in the world (over 700 tonnes in 2008), accounting for around 24% of world gold consumption, majority of it going into production of jewellery. Over the years, India is also emerging as the largest trading centre for gold.
Analyzing the trends, the study points out that demand for gems and jewellery is income elastic, and is likely to remain moderate in the near future. The slow demand revival process in USA and Europe might slow down the export growth prospects of gems and jewellery from India in the short term; however, the growth prospects in economies in India, Middle East, Hong Kong, and China are expected to help the sector to regain its glitter. Changing lifestyle and urbanization are also expected to stimulate the sales growth in the gems and jewellery industry, mainly in branded jewellery. The consumer awareness and consciousness, generated through the vigilant measures adopted by various national Governments, are expected to drive the demand for branded and hallmarked jewellery.
The study points out that the spike in gold and silver prices might change the consumer preferences, as also impact their demand pattern. The growing consumer sophistication, decline in investment-driven (jewellery) demand, and competition from other luxury goods are also likely to impact the demand pattern of gems and jewellery. A major advantage of the Indian gems and jewellery industry is the low cost of labour; India has one of the best skilled manpower to design and make high volumes of exquisite jewellery at relatively low labor cost. Exim Bank study highlights that Indian gems and jewellery industry has been increasingly building its ability to produce full range of sizes and qualities of stones, utilizing not only the low-cost and abundant workforce, but also advanced technologies. The industry has been seeking further growth through processing of larger size stones and manufacture of diamond jewellery. Both the Government and the gems and jewellery industry have recognized the use of IT in diamond clusters in order to enable seamless flow of information between the functional areas, right from job contractors to small / mid-sized firms, to large, integrated units. The IT interface would also provide the necessary platform for firms to scale up their operations.
The study concludes that while several measures have been taken, at firm-level, industry-level, and Government-level, there exists still a need to strengthen the position of India in the global market place through a concerted strategy, addressing the challenges of raw-material sourcing, technological infusion at processing stage, adoption of dynamism in design and product development, and sustainable market entry approach. The long-term outlook for Indian gems and jewellery is expected to be positive. India’s competitive advantage is likely to be centered on its skilled labour, combined with a ready adoption of leading technology, according to the study.
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